FICO Finally Makes Small Business Credit Score Available to Companies

Posted on: December 13, 2013

One problem that many small business owners across the country have likely run into as they try to help their companies grow is that it's not always easy to obtain financing simply because their personal credit standing may not be as good as it should be, and their enterprises themselves have very limited or even non-existent borrowing histories. That kind of thing may make lenders wary of their prospects for seeing a return on their investments, and thus lead to fewer approvals for companies seeking such financing.

An ability to obtain affordable credit can often make or break a company's chances for success as it attempts to grow, and with this in mind, the credit agency FICO – best known for pioneering the credit score – has finally made a change that could help many smaller and medium-sized businesses in particular succeed in this area where they might not have before, according to a report from CNNMoney. Starting next month, companies that subscribe to the firm's Creditera service (for $49.99 per month) will be able to see their small business credit scores.

In the past, it was only lenders themselves that would be able to check a company's credit rating in this way, meaning that as far as the businesses were concerned, they were often entering an application situation with little knowledge of how their qualifications would actually be judged, the report said.

Now, though, having access to this kind of information could help them to make far more informed decisions about the ways in which they are viewed externally on a strictly credit-related basis. The fact of the matter is that while banks tend to take more into consideration with small business loan requests than they do for consumer finance, the credit score of an applicant in either case is extremely important. Because of this change, companies may be in a better position to improve their standing ahead of submitting an application, which can save not only time – because companies with low credit scores will be able to not bother getting the necessary paperwork together – but also the frustration that comes with a rejection.

Joining a crowded arena However, the decision might not be as impactful as one might imagine, the report said. Though FICO pretty much kickstarted the idea of credit scoring in the first place, it's hardly the first company in its field to extend its services to the realm of small business. Dun and Bradstreet and Paydex, for instance, already offer small business credit scoring services.

"The change definitely offers some value to the mid-sized small businesses, but it's not the greatest thing since sliced bread," said John Ulzheimer, a credit expert at CreditSesame.com.

In addition, owners of companies with limited credit histories may also still list themselves as co-signers on the deal as a means of helping to ensure that their application goes through, though it's important to note that this ties personal credit standing to the success or failure of a company, and could therefore put owners in a bad spot if something goes wrong. On the other hand, consumers tend to have far easier and more affordable access to their own credit ratings and therefore those who worry about their ability to qualify might want to consider this option when worried about other such issues.

Finally, owners who are considering applying for this type of credit in the near future might also want to consider the ways in which they can improve their companies' bottom lines, such as by finding more affordable small business insurance. Cutting liability insurance costs, for instance, can save businesses thousands of dollars annually.